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12 July, 17:36

If you can invest $1,000 today and it will grow to be worth $1,350 over the next 6 years, what is the compound annual return you will earn on this investment?

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  1. 12 July, 21:02
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    5.13%

    Explanation:

    Given:

    Worth of investment today (PV) = $1,000

    Investment worth after 6 years (FV) = $1,350

    Time period of investment (nper) = 6 Years

    It is required to compute annual return (RATE). This can be computed using spreadsheet function = RATE (nper,-PV, FV).

    Substituting the values, we get = RATE (6,-1000,1350)

    = 5.13%

    Present value is negative as it is a cash outflow.

    Therefore, annual return is computes as 5.13%.
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